plugandabandonment

High-Quality Carbon Credits from Well Plugging

mgoodman@plugandabandonment.com (Michael Goodman) — Mon, 07 Oct 2024 14:55:29 GMT

Carbon credits (also often called “offsets”) represent one ton of CO2 emissions reduced from the atmosphere. Companies buy these credits and retire them to offset their own annual carbon footprint, after reducing emissions as much as possible internally. In a perfect world, reducing a carbon footprint by one ton has the equivalent climate impact as buying one carbon credit. But is this true? Does one carbon credit actually equal one ton of carbon emissions reduced from the atmosphere? Before we answer these questions, lets take a look at one of the protocols for generating carbon credits from plugging and abandoning oil and gas wells.

BCarbon is a not-for-profit carbon registry with a protocol titled “Methane Capture & Reclamation,” (MCR) which is focused on permanently plugging gas wells that are sitting idle, abandoned, and/or orphaned. The protocol entails finding methane-leaking wells and permanently plugging them, resulting in what is known as avoidance carbon credits, seeing that future emissions have been avoided. The amount of credits generated relies on historical production data to estimate the volume of methane gas that would have leaked over the next 20 years. The calculations use an industry-standard decline curve model and leak rate model to determine future gas leak volumes and subsequently methane tonnage. Methane is then converted into CO2-equivalent (CO2e) to determine the number of carbon credits each well generates. The protocol requires that the plugging plans and emissions calculations are verified and validated by a neutral third party before and after the wells are plugged. The project also is not complete

until 1) a post-plugging site assessment has determined that there are no more methane emissions and 2) the regulatory agency signs the plugging record stating that the well has been plugged in accordance with regulatory requirements. Finally, the protocol requires a site visit one year post-plugging to again confirm that there are no methane emissions.

Now that we have a basic understanding of BCarbon’s methodology for plugging wells for carbon credits, lets look at some of the key ingredients of a high-quality carbon credit and figure out how reliable these P&A-generated credits actually are.

Additional

Additionality is the idea that the positive climate action project would not have taken place without the carbon market to incentivize action. While operators are supposed to plug the wells that they drill when they are done producing, the reality is not so clear. In fact, the United States Environmental Protection Agency (USEPA) estimates that there are about 3.5 million abandoned wells across the USA ( see here ). BCarbon’s MCR protocol deems a well additional if “at the time of plugging, no person or entity has a firm, non-extendable legal obligation to plug it either (a) by law, regulation, statute, court order or other government requirement, or (b) by private contract.”

Real

For a carbon credit to be considered real it must represent an actual, verifiable reduction in emissions. The BCarbon protocol requires that actual evidence of emissions from each well are documented and measured. The calculations that determine the quantity of credits use the same scientific rigor that is used for SEC reporting for determining remaining gas in reserve. Finally, the work of plugging the well is signed off by a regulatory agency, demonstrating the realness of the work performed.

Permanent

Permanence in the carbon market refers to how long the carbon benefit from a project will last. High-quality well plugging consists of multiple 100+ foot cement plugs, (a) cast-iron bridge plug(s), and high-density kill fluid combined with pressure testing to ensure that the well is permanently sealed off.

Transparent

Transparency refers to having all the information and data available to interested parties. It also includes a public record and accounting of the credits generated, transacted, and retired. Abundant documentation and record-keeping are required as part of the MCR protocol, including project plans, photos, calculations, regulatory records, and more. Once the credits have been issued, the project information is available on the BCarbon Registry to all interested parties. BCarbon generates the carbon credits on the blockchain, where all accounting is handled as public smart contracts.

Immediate

Carbon credit projects that are immediate mean those that instantly result in the proposed result, as opposed to taking years and sometimes decades for the results to occur. Plugging wells puts an immediate end to emissions, thus have a direct impact on the environment, and immediately producing the total volume of credits for a project.

Measurable

Measurability in the carbon market refers to having CO2e quantification methods that are reliable, accurate, data driven, and repeatable. The calculations needed to fulfil the MCR protocol are industry-standard equations for determining remaining gas reserves. The calculations rely on regulatory-reported gas production numbers that are publicly available. The decline curve and leak rate model spreadsheets established by BCarbon are also publicly available and generate consistent CO2e emissions reduction results when cross-examined.

3rd-Party Validated

All carbon credit projects are required to have 3rd party validation and verification, which is a rigorous process that ensures the accuracy and eligibility of the project and claimed emissions reduction quantities. BCarbon’s MCR protocol requires that each project be validated prior to execution by a BCarbon-approved 3rd party validator and then verified once the project is complete.

Beneficial to the Community

Benefits of carbon credit project should go beyond just emissions reductions. Plugging wells has the opportunity to 1) create jobs, 2) increase the value of surrounding residential and commercial property, 3) improve human health conditions, 4) increase biodiversity, 5) remove potential liabilities to surrounding communities, and 6) improve air quality.

The long-term success of the voluntary carbon market is highly dependent on having high-quality solutions that buyers can trust. Buyers ultimately want to purchase credits from projects that represent real emissions reductions with real, measurable solutions. The BCarbon Methane Capture & Reclamation protocol was designed to bring high-quality well plug and abandonment emissions reduction projects to the market.

Guardian Plug & Abandonment is a project developer with BCarbon. If you’d like to learn more, reach out to us at info@plugandabandonment.com or check out our website at https://www.plugandabandonment.com/ .

Preventing Orphan Wells by Addressing Idle Wells

Mon, 03 Jun 2024 20:28:49 GMT

Within the oil and gas well plugging industry, orphan wells have captured quite a bit of attention in the last 2-3 years. This is because of two main factors – 1) Large amounts of federal funding to locate, measure, and plug orphan wells and 2) carbon credit opportunities for plugging leaking orphan wells, particularly from ACR which had their methodology published in May 2023.

Orphan Wells

But what is an orphan well and why are these funding and carbon credit opportunities focused only on orphan wells? The consensus among all state and federal regulatory agencies is that an orphan well is no longer serving its purpose and it has no known owner or operator capable of properly plugging it. With no solvent operator, the well owner becomes the regulatory agency. The United States Geological Survey (USGS) conducted a study in 2021 and identified records of more than 126,000 orphan wells (see here ) and the number of undocumented orphan wells is estimated to be between 310,000 and 800,000 (see here ) according to a 2021 study by the Interstate Oil & Gas Compact Commission (IOGCC), but the real tally may be much higher.

The reason they are the target of federal funding is because they are the responsibility of these government agencies. The reason ACR and the carbon industry have adopted orphan well methodologies is because of the clear additionality argument, stating that the business-as-usual case is that orphan wells are not plugged in a timely manner.

Idle Wells

The orphan well problem is large, but it is just the tip of the iceberg. Of the more than 4 million wells that have been drilled to extract oil and natural gas (see here ), the EPA estimates that there are a total of 3.7 million abandoned wells (see here ), which includes the orphan wells in the USGS study. Most idle wells were made idle with the hope of bringing them back to production when the economic situation improves. The reality, however, is that the majority of these wells are forgotten about. As is pointed out in this article , due to the complex and expensive process to plug wells, many operators “have simply opted to defer their [plugging] obligation by paying fees as low as a few hundred dollars per year.”

Another option for operators of low producing and idle wells is to bundle up a package of wells and sell them to smaller operators that can work on thinner profit margins. In fact, many small operators will give away their wells to avoid the plugging liability.

Outlook on the future

As is pointed out in the IOGCC study, the number of idle wells “is a concern because of the potential for the wells to deteriorate over time or become orphans.” In an effort to improve operations in the oil and gas industry, the EPA issued its “Final Rule” in early 2024, which is aimed at reducing methane emissions. Among other things, this final rule increases routine emissions monitoring requirements, increases regulation on flaring and venting gas, requires improved greenhouse gas reporting, and imposes a methane tax for excess methane emissions. While many believe this is a step in the right direction for the industry, it also puts small to medium oil and gas operators in a pinch. Many don’t have the knowledge or resources to comply with these regulations, which will cause some to go bankrupt.

When an oil and gas operator goes bankrupt, their wells become orphaned. Despite the efforts to plug orphan wells with federal funding and carbon credit motives, many experts in the industry fear that the number of orphan wells will still increase, not decrease..

Getting ahead of the problem

Plugging orphan wells will certainly help clean up the industry’s legacy issues, but that solution is treating the symptom rather than solving the ongoing issue. Fortunately for the industry, solutions are coming to prevent future orphan wells.

First is The Methane Emissions Reduction Program, which announced $350 million to 14 states to help measure methane emissions and plug marginal and idle conventional wells (see here ). This is a federal program aimed at “helping well owners and operators [to] voluntarily identify and eliminate methane emissions from low-producing conventional oil and gas wells…with disproportionately high methane emissions.” A Notice of Intent to make funds available to states was announced in February 2024 and implementation by the states is expected to begin in the Fall of 2024.

Second are expanding carbon credit methodologies. In addition to orphan well methodologies, several registries are establishing methodologies that address idle and marginal wells. Of those is BCarbon , whose methodology titled “Methane Capture & Reclamation” was released in October 2023. This methodology applies to all leaking, non-producing wells that historically produced gas, with the objective of preventing current and future methane leaks. As is stated in the methodology, “the key underlying observation is that leaking wells eventually completely exhaust the gas that is potentially available…” The quantity of carbon credits generated relies upon an industry-standard decline curve analysis of the historical gas production data combined with a leak rate model that determines the quantity of methane that would have leaked over the next 20 years (i.e. the crediting period).

Final thought

These solutions certainly won’t fix the industry overnight, but they are adding to the list of innovative solutions to help clean up legacy issues. If you’d like to learn more, reach out to Guardian Plug & Abandonment at info@plugandabandonment.com or check out our website at https://www.plugandabandonment.com/ .

Measuring methane emissions from orphan wells for carbon credits

Mon, 12 Feb 2024 21:03:49 GMT

The voluntary carbon market (VCM) is a marketplace where individuals, organizations, and companies can voluntarily buy and sell carbon credits or offsets. The term “credit” and “offset” are frequently used interchangeably, and they represent a reduction or removal of greenhouse gas emissions from the atmosphere. The types of projects that can generate carbon offset credits include renewable energy projects, energy efficiency projects, forestry projects, methane capture and destruction projects, industrial process improvement projects, transportation projects, and agricultural and livestock projects. Each type of project must follow a specific methodology written and published by a carbon registry, which is a company that issues and retires carbon credits. Each written methodology has calculations to determine the quantity of credits each project will generate, with each credit equaling 1 ton of CO2 equivalent (CO2e) emissions reductions. For projects to qualify, they must pass the additionality test, which essentially means that the emission reductions they achieve are additional to what would have occurred in the absence of the project. In other words, the activities and outcomes must go beyond what would have happened under a “business-as-usual” case.

Historically, the VCM has been focused primarily on nature-based solutions, energy-efficiency projects, and renewable energy projects. However, in 2023, the carbon offset credit market met with the oil and gas industry. Two carbon registries, ACR and CarbonPath , established methodologies to generate carbon credits from plugging orphan oil and gas wells. Orphan wells are those that were drilled and operated by companies that have since gone bankrupt, leaving the responsibility to properly plug the wells to the state regulatory agency.

Here are how those methodologies work. By voluntarily “taking over” an orphan well from the state regulatory agency and plugging it, project developers reduce future methane (the primary component of natural gas) emissions into the atmosphere. The quantity of avoided future methane emissions determines the quantity of avoidance credits the well will generate upon plugging. Keep in mind, however, that not all orphan wells will be eligible for generating credits because not all orphan wells emit methane. Project developers must find a way to access and screen orphan wells for leaks. The steps involved to estimate the carbon credit potential of each orphan well are 1) quantifying the yearly methane emissions rate, 2) converting the methane to CO2 equivalent, and 3) multiplying by the appropriate crediting period, as described in detail below.

1. Quantify methane emissions rate

What exactly is an emissions rate? Well, it’s a volume of gas escaping from the well per unit of time. This rate can then be multiplied by the methane concentration (often between 70% and 90%) to determine the methane emissions rate. There are a variety of technologies to measure these parameters, all with unique pros and cons for use in the field in varying conditions. Some of the more popular methodologies include static and dynamic chambers, high volume samplers, vent-flow meters, and various plume modeling techniques that are often paired with optical gas imaging cameras.

At this stage in the process, project developers are simply looking for fast and reasonably reliable methods and technologies to estimate the quantity of methane leaking from the orphan well each year.

2. Methane to CO2 conversion

The methodologies to generate carbon offset credits rely on measuring the quantity of methane escaping from the well and converting it to CO2e. To convert methane to CO2e, we must look at its life span and its potency relative to CO2. Methane lives for about a decade before breaking down, whereas CO2 can last for centuries. However, methane can trap over 100 times as much heat as CO2 in the short term. The term Global Warming Potential (GWP) has been used to describe the relative impacts of methane (and other gases) over time relative to CO2. Methane’s GWP100 (warming potential relative to CO2 over a 100-year period) is approximately 25, whereas its GWP20 is about 80. Both carbon registries have adopted the GWP100 conversion rate and require that measured methane emissions rates be multiplied by 25 to convert to CO2e.

3. Crediting Period

One main difference between the methodologies established by ACR and CarbonPath is the crediting period, which is defined as the length of time for which a project is valid or the length of time a project can generate carbon credits. ACR uses a crediting period of 20 years which “reflects Enverus oilfield data that demonstrates that the average last production was 17 years ago for wells currently classified as orphan by states” according to their methodology . CarbonPath, on the other hand, ran a model with various plugging costs and calculated breakeven dollar per credit amounts. Ultimately, they decided that to incentivize taking climate action, a 50-year crediting period “strikes a balance between over crediting (representing an exceptionally long crediting period) and under crediting (with a shorter crediting period), that would raise the breakeven costs of the credits to an unactionable level,” as stated in their methodology . Thus, if a project developer registers a project with ACR, the credits generated will be multiplied by 20 years of emissions, while CarbonPath-registered projects will generate credits based on 50 years of emissions.

For project developers, estimating the quantity of carbon credits a well can generate is only the first step. They must then determine, based on their carbon credit estimates and their estimated value of the credits, which wells will be economical to plug. Then, the developer must go to the state regulatory agency and adopt the orphan well. This process involves posting bond money with the agency and registering as an oil and gas operator. Once the wells are adopted by the project developer, they can be registered as a project with CarbonPath or ACR. The project developer will then follow the methodology’s steps to quantify emissions rates.

ACR indicates that the “Hi-Flow sampler and the chamber-based methods are approved by ACR when applied correctly in the field,” but also that other techniques may apply after seeking approval. They require that an emissions rate test must be conducted for a minimum period of two hours and document a stabilized emissions rate. A second test must be conducted at least 30 days after the initial test and show an emissions rate reasonably consistent with the first measurement.

CarbonPath only requires one emissions rate measurement to be collected before plugging the well, and they do not specify exact sampling technology and procedures. They allow novel approaches to measuring methane emissions rates.

Both registries require that the emissions rate tests be thoroughly verified by an independent and qualified 3 ^rd party at the expense of the project developer. After the 3 ^rd party has verified and approved all measurements and the project developer has collected all necessary data, pictures, and videos of the well, the project developer is ready to plug the well(s). This will involve subcontracting a well servicing company that can enter the borehole, seal off productive zones with cement, and ultimately restore the site to background conditions, following all state regulations. After the plugging is complete, both ACR and CarbonPath require that the project developer return to the site to confirm that the methane emissions have ceased.

ACR and CarbonPath will issue the total amount of carbon credits to the project developer once the regulatory agency-signed plugging document has been received and all other verification and documentation has been completed.

The final step for a project developer is to sell the credits. ACR-generated credits can be listed for sale on ACR-approved retailers and marketplaces. CarbonPath-generated credits are listed for sale on their own website and are posted for sale at $30 each. However, project developers can enter into an agreement with a buyer and CarbonPath to sell at a different price, should they choose to do so.

These are exciting times for the oil and gas industry. With these new methodologies, the oil and gas industry will clean up old wells, reduce methane gas emissions, and contribute to positive climate action. Early adopters of this methodology will be best suited to find the most highly-emitting orphan wells and benefit the most financially from stopping these significant sources of methane emissions.

Guardian Plug & Abandonment (GPA) is a project developer for carbon projects. GPA is also a qualified measurement specialist and can quantify the carbon credits a leaking orphan well could generate with ACR and CarbonPath. Should you have questions, feel free to reach out at info@plugandabandonment.com or check out our website at https://www.plugandabandonment.com/ .

Federal Funding to Measure Wellhead Methane Emissions

Tue, 30 Jan 2024 19:20:12 GMT

In the US oil and gas industry, regulations regarding air pollution have evolved since the Clean Air Act of 1970. These regulations were focused on gas emissions in general, but they did not address methane specifically. It was not until the EPA issued its New Source Performance Standards in 2012 that methane emissions specifically were regulated. Even then, those regulations did not require that methane emissions be monitored from wellheads. It wasn’t until 2021 that emphasis was placed on detecting, measuring, and reducing methane emissions from individual wellheads, thanks to three main federal programs described below.

1 – IIJA grant money for orphan-well plugging

In November 2021 the Biden administration passed the Bipartisan Infrastructure Deal, also known as the Infrastructure Investment and Jobs Act (IIJA). Among many other things, this bill delegated $4.7 billion dollars to plug orphan wells and restore the former well sites (read more here ). An orphan well is a well whose former owners went out of business, leaving the responsibility to plug it to the state regulatory agency. In the US, estimates indicate that there are between hundreds of thousands and millions of orphan wells. In addition to being environmental eyesores, they can also leak natural gas into the atmosphere and contribute to climate problems.

Phase one of the IIJA funding included $25 million to 22 states with orphan wells. This money came with spending requirements, but was designated 1) to begin prioritizing orphan wells to plug, 2) to establish plans to measure methane emissions, and 3) to conduct well plugging and site restoration activities. Now, states are in the process of receiving phase 1 formula grant money for 2024, following the July 2023 Department of Interior (DOI) document titled " Phase 1 Formula Grant Guidance ." This document presents the amount of money allocated to each state, which depends in part on the number of orphan wells it has. For states with many orphan wells, they will be able to apply annually through 2028 for another portion of their budget. Over the course of the six years, Texas and Pennsylvania are eligible for the highest amount of funding, both of which are eligible for over $300 million each.

This money, however, comes with many strings attached. To receive this formula grant money, states must adhere to strict budget and reporting requirements, one of which is related to measuring methane emissions. Specifically, states must screen for and quantify methane emissions at each wellhead prior to plugging the well, following the procedures outlined in a 32-page document subtitled " Methane Measurement Guidelines .” This document describes a well screening process, the main leak rate quantification protocol, exact reporting requirements, and quantification methodologies and technology. Additionally, this document requires that all methane monitoring services must be conducted by a qualified measurement specialist (QMS), that has demonstrated 20+ hours of training and experience with the equipment needed to conduct the measurements.

During the second half of 2023, states were scrambling to come up with plans to fulfil the requirements of the grant guidance document, including the requirement to measure methane emissions. Since this is a very new and unique requirement, states came up with unique solutions to fulfilling this methane measuring requirement. Examples include:

Subcontracting methane measurement services through the states bidding platform.
Partnering with a university or state geological survey to conduct methane measuring.
Conducting the methane measuring using in-house staff at the state regulatory agency.
Requiring that the company performing the P&A work using IIJA money have plans to quantify methane emissions.
Working through a statewide master subcontractor to further subcontract methane measurement services

On January 12, 2024, the DOI announced that Texas was the first to receive its formula grant money, which equals close to $80 million. Texas indicated that it would fulfil its methane measuring requirements using its own staff at the Texas Railroad Commission. The equipment they chose to utilize is an FLIR Optical Gas Imaging camera, which has the capability of estimating leak rates.

As more states receive formula grant money, we will see an increased demand for methane monitoring services. The exact technologies and procedures for executing this work are yet to be determined as more states receive their 2024 grant money.

2 – USEPA Inflation Reduction Act

Another federal program involving methane emissions monitoring comes from the United States Environmental Protection Agency (USEPA). In December 2023, funding from the Inflation Reduction Act was announced to be given to 14 states which are receiving a total of $350 million. This funding is to “support industry efforts to cut methane emissions from wells on nonfederal lands and support environmental restoration of well sites,” according to the EPA press release . Specifically, these states are to use this funding to provide “technical and financial assistance to help well owners and operators voluntarily identify and eliminate methane emissions from low-producing conventional oil and gas wells… with disproportionately high methane emissions.” Unlike the IIJA funds, these funds are to help well owners and operators study their active, producing wells, whereas the IIJA funding is designated only for orphan wells.

The largest recipient of this money was the Texas Commission on Environmental Quality (TCEQ), which received over $134 million. Currently, TCEQ is in a planning and development phase, but expects to begin executing the methane monitoring field work in the Fall of 2024. Whether that work is to be conducted by the operating companies, government staff, or 3 ^rd party consultants is yet to be determined, but we know that demand for experts in this space will increase.

3 – USEPA “Quad O” and the Final Rule

Increasing regulation from the USEPA also drives increased wellhead methane emissions monitoring. In the Code of Federal Regulations, Title 40 (Protection of Environment), Chapter 1 (Environmental Protection Agency), Subchapter C (Air Programs), Part 60 (Standards of Performance for New Stationary Sources), we find Subpart OOOO , commonly known as “Quad O.” Quad O was established in 2012 as part of the New Source Performance Standards to implement substantial new methane emissions monitoring and reduction requirements for oil and natural gas sources. These requirements apply to facilities constructed or modified after August 23, 2011 and before September 18, 2015. Subpart OOOOa introduced a stricter set of requirements for facilities that were constructed or modified after September 18, 2015.

In December 2023, the USEPA issued its Final Rule which is aimed at sharply reducing methane and other harmful pollution. This includes implementation plans for Subpart OOOOb and OOOOc . Quad Ob applies to facilities constructed or modified after December 6, 2022. One major change from Quad O and Quad Oa to Quad Ob is the requirement to regularly monitor individual wellhead sites, which were previously exempt. Specifically, these obligations are for “all well sites to routinely monitor for fugitive emissions and repair leaks found—ranging from a quarterly audio, visual, and olfactory (AVO) inspection for single wellhead-only sites to quarterly optical gas imaging (OGI) inspections for any site with significant production equipment.” Should leaks be identified during these inspections, they must be repaired within 15 days.

Quad Oc is the guidelines governing future state rulemakings to regulate existing sources. States must implement their rulings within 4.5 years after the EPA Final Rule publication date. These state rules will apply to existing oil and gas operations and will constitute compliance with Quad O and Quad Oa.

Each of these Federal Programs demonstrates the need for increased methane monitoring services at wellheads. IIJA funding, USEPA funding, and the USEPA Final Rule establish the specific requirements and expectations to either receive grant money or to avoid compliance issues. As these programs begin to be implemented, we will undoubtedly see an increase in both technology offerings AND service companies/environmental consultants. These technologies and people will be prepared to meet the regulatory requirements by quantifying methane emissions rates from wellheads and surrounding production equipment.

Guardian Plug & Abandonment is a QMS-certified service provider offering methane emissions monitoring services. Please Reach out with questions at info@plugandabandonment.com or visit our website at https://www.plugandabandonment.com/ .

Gas production and no pipeline? A solution worth considering

Thu, 25 Jan 2024 14:59:25 GMT

In a rural area of south central Texas, a small, one-man operating company manages a handful of oil wells. These oil wells have been around for a few decades, with peak production in the mid-1990's. For the small operator, keeping these wells running isn't a bad deal - after paying for upkeep, maintenance, electricity, and water disposal, he nets anywhere from $1,000 to $3,000 a month. He enjoys the monthly income, but he's bothered by one simple fact about these wells - leaking gas emissions. There is enough gas coming out of the wellbores to be a health concern. The gas is also highly flammable. These wells are also within a few hundred feet of houses, and he doesn't like affecting the air quality in their backyards. All of this makes the operator uncomfortable, but what other choice does he have? If he is going to produce oil, there will be gas emissions. He can't simply put a valve on the wellhead to block gas emissions because it will build up pressure until it becomes a hazard of its own. The real question is: Why is there no way to capture and sell the gas by tying into a gas pipeline?

You see, in the early days of the oil boom, in some cases the primary focus of production was oil, which, when produced, could be easily stored in tanks and transported in barrels and on railways. Gas production was initially more difficult to capture and transport. Underground pipelines needed to be installed to connect the field to the nearby urban area. The earliest pipelines date back to the late 19th-century, and the first major long-distance pipeline was the "Wabash Pipeline", constructed in 1906 to transport natural gas from fields in Indiana to the city of Chicago, Illinois. But not all oil and gas fields were developed with pipelines for natural gas production. Many fields produced predominantly oil, and the economics never worked out to build a pipeline to produce and transport the little natural gas production. For this field in south central Texas, no pipeline was ever installed for gas production and transportation.

In the fields with no gas pipeline, historically what happened with the associated gas? In most cases, it was flared (or burned) off. Flaring was viewed as an easy and inexpensive way to mitigate risk and destroy waste products. In the US, flaring continued as an unregulated activity for nearly the first century of the oil and gas industry. It wasn't until the mid-20th century that environmental concerns arose regarding the negative impact of flaring.

Regulations restricting the quantity of flaring began in the US in the 1960's. Over time the regulations restricting venting and flaring became more and more stringent. Most recently, the United States Environmental Protection Agency (USEPA) released its final rule in December 2023, which established the most aggressive regulation to date. In addition to reporting and leak detection requirements, operators are now also subject to a methane tax on facilities that are out of compliance with emissions guidelines.

These regulations have dramatically reduced gas emissions as an industry. Most of the large oil and gas companies have improved their field operations dramatically over the last 50 years of increased regulation. In many cases, however, the small and very small well operators haven't improved field operations in decades. Many do not have the capital to improve operations in such a way to be compliant with these regulations. Others simply don't know the regulations or don't know how to improve field operations. Additionally, most of these small operators slide under the radar of the state regulatory agencies. For example, as long as the small operators are doing the minimum to keep the agency satisfied, the agency won't harp on them to reduce the quantity of gas they vent to the atmosphere. Because of this scenario, our small operator in south central Texas will continue to emit his associated gas production with no consequences.

Other than vent the gas, what options does the operator have? Without a pipeline to sell the gas to, options are very limited. In theory, operators can hook the gas up to a generator on site to produce electricity. That electricity could be tied into the local power grid or used for other on-site or nearby electrical demands. But is that a realistic scenario for most wells? Not at all.

A more universally-realistic and obvious alternative to venting the gas is to permanently plug and abandon the wells. On the surface, however, this sounds like an extremely uneconomical option due to the reduction in monthly revenue and an expensive bill for well plugging and land restoration. Fortunately, companies such as CarbonPath and BCarbon are helping incentivize small operators to close their marginal, leaking oil and gas wells. By plugging these wells and permanently stopping future greenhouse gas emissions into the atmosphere, carbon offset credits can be generated following the calculations established in their methodologies. Here is how it works:

1 - Identify wells with remaining oil and/or gas production and gas leaks at the surface.

2 - Calculate the total reduction in greenhouse gas emissions by plugging the well.

3 - After the well is plugged, generate carbon offset credits, with each credit equaling 1 metric ton of CO2e.

4 - Sell these carbon credits to companies that have pledged "net zero emissions" to offset their carbon footprint.

Perhaps our small operator could generate tens of thousands of carbon offset credits from plugging his gas-leaking oil wells in south central Texas. Not only would he be taking positive climate action, but he also has the possibility of recovering his plugging cost and beyond by selling these carbon credits.

Guardian Plug & Abandonment is a project developer that can help small operators such as our friend in south central Texas. We will determine the carbon credit value of your well and conduct the field work necessary for the carbon project. Reach out with questions at info@plugandabandonment.com or visit our website at https://www.plugandabandonment.com/ .

Life of an Oil and Gas well + the solution to get more plugged

Tue, 23 Jan 2024 15:47:30 GMT

Oil and Gas exploration began in the mid-1800's. Since that time, over 4 million oil and gas wells have been drilled in the United States. Many wells produce for a few decades, but others produce for over 50 years. In fact, there are still some producing wells that were drilled over 100 years ago. Generally, the lifespan of a well looks something like the scenario below:

In Northeast Texas and Northwestern Louisiana, the Rodessa Oilfield was discovered in 1936. Many wells were originally drilled by Texaco, a major exploration and drilling company. Peak production in the Rodessa field was over 12 million barrels of oil in 1937. Over time, production naturally declined. Eventually, many of these wells in the Rodessa field were no longer economic for Texaco to produce. Texaco plugged many of these wells, but most of the marginally-producing wells were sold to smaller operators that could work on thinner margins due to lower overhead costs.

These small operators produced these old wells as long as they could. Eventually, their margins got too thin and they chose to sell the remaining, marginally-producing wells to a local mom and pop operating company because these wells are more of a plugging liability than an asset. The mom and pop operating company then continued to produce these wells for as long as possible.

Over time and one by one, the wells stop producing enough to cover the costs of electricity, maintenance, and water disposal. Eventually, the mom and pop operators in the Rodessa field end up with 50 wells, but only 5 are producing.

In Texas, after a well has stopped producing for a year, operators are required to plug it. Thus, to avoid plugging the other 45, the operating company reports that all 50 are still producing, and the amount of production they report is what the 5 remaining wells are actually producing.

This is why the Rodessa field in Northeast Texas has hundreds of "active" well sites. Some are still marginally producing, but many are sitting there idle, waiting to be plugged. Many were drilled in the 1930's, while others were drilled decades later.

Eventually for the mom and pop operator, production on the remaining 5 will no longer be economical. The state regulatory agency will come breathing down their necks and require that all 50 wells be plugged.

Considering a plugging job with site restoration costs anywhere from $30,000 to $100,000 per well, do you think the mom and pop operating company will fork over $1.5 to $5 million to plug all 50 wells?

Not a chance.

So what does mom and pop operating do? Declare bankrupcy. All 50 wells end up as orphan wells, and the responsibility to plug them lies with the state regulatory agency through state and federal funding.

This is why we have somewhere between 100,000 and 3 million orphan wells in the United States today.

There is hope, though. Orphan wells have gotten lots of attention as of the last few years. The Federal government is providing $4.7 BILLION to plug orphan wells!!! That sum of money is FANTASTIC, but what are we going to do to stop the constant flow of FUTURE orphan wells?

If you ask me, the federal funding to plug orphan wells is like forgiving student loan debt while issuing more loans to students ��.... how helpful is that?

The solution ------- CARBON CREDITS.

Okay, so what is a carbon credit? One carbon credit represents 1 ton of CO2 equivalent from entering the atmosphere. By VOLUNTARILY taking action to reduce greenhouse gas emissions, we (as a society) can generate carbon credits.

Companies such as CarbonPath , ZeroSix , BCarbon , Onyx Transition , and ClimateWells are trying to incentivize early well plugging. They have written specific methodologies that a project developer can follow to quantify greenhouse gas emissions reductions and therefore generate high-quality carbon credits. Their methodologies are based on quantifying the remaining reserves and/or gas emissions and determining how much gas would be emitted to the atmosphere from combusting these resources. By plugging these resources in the ground permanently, we AVOID future gas emissions. Hence, these carbon credits are considered "avoidance" credits, meaning they reduce future emissions from ocurring.

Now, I know what you are asking. Who buys these credits? And how much are they worth? Well, in most of the US, the carbon market is unregulated. Companies are not "required" to meet carbon emissions targets yet . Currently, the market we operate on is the Voluntary Carbon Market (VCM). The VCM is where companies that pledge "net zero" or "carbon neutral" go to offset their carbon emissions. Each year, to be carbon neutral, companies must calculate their carbon footprint and purchase the carbon credits (technically called carbon offsets) in order to claim "carbon neutral" or "zero-emissions".

The value of these credits is driven by the buyer, each of which will value credits differently. Some may value carbon credits generated from planting trees, while others may value improving refrigerant technology, and another may value directly sucking CO2 out of the air. Some companies may want to support providing improved cooking solutions to 3rd world countires, and others may want to support solar and wind energy projects. All of these methodologies in some form VOLUNTARILY reduce CO2 emissions to the atmosphere and are valid ways of generating carbon credits.

We believe that avoidance credits generated from permanently plugging wells are some of the highest-quality carbon credits you can buy. All the data, photos, and regulatory signatures are held publicly on the blockchain, and all the transaction history and selling prices are as transparent as it gets.

So I'll return to my question - How much are these well-plugging avoidance carbon credits worth? Maybe $20-$40 each as of now, but with the carbon maket expected to grow from $2 billion to $50 billion by 2030, you'd better believe that the price is going to rise.

At Guardian Plug & Abandonment , we can help you learn how to plug wells for carbon credits. We are project developers. Additionally, we are Qualified Measurement Specialists and can detect and quantify methane emissions from your wells.

Feel free to reach out with questions at info@plugandabandonment.com or visit our website at https://www.plugandabandonment.com/ .